Synopsis–With other strategic backers like Softbank fussing over profitability after Vision Fund’s missteps it’s time for Sharma to figure out what Paytm – India’s most valuable fintech company commanding billion $16 billion valuation and counting – wants to be entering its adolescent years.
Their bromance had apparently bloomed after a twenty minute meeting that went on for two hours, culminating in Alibaba and its founder Jack Ma taking a large bite of Vijay Shekhar Sharma’s Paytm in 2015 and becoming its largest shareholder. An ecstatic Sharma proudly proclaimed: ‘Mere paas Ma Hain, Jack Ma.’
Nobody expected five years later, border kerfuffles would force Sharma play the nationalism card to publicly play down the influence of China’s tech titan on his operations most of 2020. More importantly, Ant’s relentless march got halted back home last month when the communist bosses of China first torpedoed the $37 billion IPO of Alibaba’s fintech arm Ant Financial and then clamped down on its wealth management and lending operations only to launch a-first-of-its-kind probe into the purported monopolistic trade practices of the entire e-commerce group. With Ma on his knees, let’s face it, the Ant story is up in the air. And if Alibaba and Ant is indeed nationalised, as reports suggest, then imagine the optics in the current milieu!
With other strategic backers like Softbank fussing over profitability after Vision Fund’s missteps it’s time for Sharma to figure out what Paytm – India’s most valuable fintech company commanding billion $16 billion valuation and counting – wants to be entering its adolescent years.
Buoyed by the initial runaway success of the digital wallets business riding piggyback on exclusive tie-ups with Uber; strategic alliances with online travel, e-commerce and eventually surging capitalising on demonetisation, Sharma morphed his company into a supermarket modelled on Ant selling everything from insurance, mutual funds to loans and Lays chips. Then one day it woke up to become a payments bank, the next a ticketing company and a travel agent. Then it started fancying itself as a Robin Hood knockoff till gaming and cloud computing caught its eyeballs. By spreading so fast and thin, most verticals haven’t gathered scale or became profitable, whittling away the early advantages. Today PayTM lacks moats for users or merchants to download the app. Ant was supremely profitable. PayTm is still bleeding after 10 years.
So far, Alibaba was Paytm’s universal provider — tech support, consumer insights, business plans and funds. But now with its global ambitions unwinding and valuations taking a hard knock, Sharma desperately needs a new saviour.
The Paytm home run ended when UPI killed all digital wallets with its neutral railroad that democratised our payments landscape with real time transfers for both person-to-person and person-to-merchant. The added features further accelerated growth but also made the space over crowded with deep pocket big tech gorillas like Google, Facebook or deep pocket telcos/retailers like Reliance and Walmart (PhonePe) jumping right into the pool. Today, Google Pay and PhonePe are the dominant force cornering 40% of the market forcing even Paytm, now pushed to 3rd place, to add the option. Finally with QR codes becoming interoperable, Paytm’s presence at the merchants will also diminish drastically.
The battle in payments app space now rests upon who offers the best user experience with seamless, feature-rich platforms. But a fragmented market means no customer loyalty and churn depends on freebies and cash backs. Further with zero MDR, wallets on standalone basis are unlikely to make money thereby forcing them to use payments to hook users and then offer a portfolio of services like insurance, wealth management, lending to monetise them, much like the Ant play book.
But unlike China, India is not a duopoly but a bazaar with 2000 plus fintech players jostling for market and wallet shares. Nobody has the edge over consumer data like Ma did till just a few weeks back. And in this Darwinian zeitgeist, Paytm is therefore increasingly looking frail, losing share even its core payments business. Take away discounts and most Paytm businesses fall apart.
Vijay Shekhar SharmaThe Paytm home run ended when UPI killed all digital wallets with its neutral railroad that democratised our payments landscape with real time transfers for both person-to-person and person-to-merchant.
Unless you have a shadow bank in your fold, scaling up is not easy and Paytm’s NBFC application is stuck with a proactive RBI for the last 2.5 years as has been its request to become a small finance bank from the current payments bank setup, after facing the regulatory RBI’s rap in 2019 for audit lapses.
New age brokers like Zerodha the home grown Robinhood has disrupted broking with their aggressive price offerings and low flat fees. Most importantly, in the US, Robinhood makes money by selling retail orders to institutional traders who front run them. But it’s not allowed in India. The still miniscule mutual funds game is overwhelmingly metro led with over 85% of industry AUM generated in regular mutual funds compared to platforms like PayTm Money. Targeting second tier cities can deliver only that much. Likewise, in the equally hyper-competitive insurance space, either you distribute products like a policybazaar or manufacture them like Acko and Digit. PayTm is trying both, so far with mixed results.
All investors would eventually seek an exit and without profits, a listing is out of the question. So what is the way out?
A potential merger with an Amazon is a thought worth exploring. The US retailer has been late in payments, has limited feet on street and PayTm still has a massive network that an Amazon can leverage. Both Paypal and Any were fundamentally built on ecommerce and not the other way round like Paytm. So in the battle between two of the world’s richest men, Mukesh Ambani and Jeff Bezos to win over the Indian consumer, Sharma would do better and look to the west.
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